Sunday, May 04, 2014

Goofy Amazon Tax Law

I just ordered three blu-rays off Amazon. The bill came to $44.03 and, since California forced Amazon's hand and now Amazon collects sales tax in California, the sales tax came to $0.48

Huh? How's that? That's only about 1%. California's tax rate is 8%. (That's right, it's 8%. When I was a kid it was only 6%, and the state is in worse shape now than it was then--but that's a story for a different post).

Being a math guy it didn't take me long to figure out how that worked. Only one of the disks, at $5.98, is being sold directly by Amazon. 8% of $5.98 is 48 cents. Amazon isn't collecting the tax for the other two entities.

Umm....it's more than a little misleading to say California "forced Amazon's hand." Amazon has functioning distribution centers in California, and therefore, according to the 1992 Supreme Court decision (Quill vs. North Dakota) that governs "nexus" rules, California is very well within it's right to ask Amazon to collect sales taxes.

You have the timeline backwards. Amazon only built those centers *after* it agreed to collect taxes for California. It agreed to do so for several reasons, including all the Amazon "affiliates" (small businesses) that they'd have had to cut from the team in order to keep from collecting the taxes. They built the distribution centers so that there's no doubt that Quill still is the rule that everyone follows.